Rising Food Prices Hard to Swallow

September 21, 2011

By

Susan A. Davis

A truck of food from the farmers' market. File photo.

NEWPORT, VT - The United Nations has called the world's growing food crisis the "silent tsunami," yet here in the United States, we seemed to have escaped the worst of it. Until now.
It's no secret that food costs are climbing. It hasn't been a "skyrocketing" increase so much as a steady climb, the kind that leaves you looking at your food bill six months down the line and saying, "When did peanut butter get so expensive? When did milk get to be $5 a gallon?" It almost sneaked up on us. Almost. The tighter your wallet (particularly if you're on a fixed income), the more likely you are to have noticed.
It's easy, of course, to look at the rising cost of fuel and assume that much of that increase is eaten up in transportation costs, but the problem goes much deeper than that.
The Food and Agriculture Organization (FAO) of the United Nations had originally predicted that food supplies would be up, prices would stabilize and the outlook would be good in terms of both supply and pricing. The world, however, didn't cooperate with the expert predictions of the FAO.
The FAO in a recent Food Outlook: Global Market Analysis (June 2011), reported: "In a remarkable turn of events, earlier prospects for more comfortable supply situations and stable prices gave way to increasingly worrisome outlooks and to an escalation of international prices to levels not seen in decades. In fact, the FAO food price index in May stood at a near historical high of 232 points, down only 6 points from the February record. While unfavorable weather was the main culprit, a host of other unpredictable factors negatively impacted stability in the food markets, including the catastrophe in Japan, an unprecedented wave of political unrests engulfing many countries in North Africa and the Near East, another strong increase in oil prices, prolonged uncertainty in financial markets and in the global economy." (See http://www.fao.org/giews/ and related web sites.)
The statement is reminiscent of the old joke: "If you want to hear God laugh, tell Him your plans."
From page one.
It's not hard to look at the devastating effects of droughts and floods and fires throughout the United States, and especially in those areas of America's Midwest "food bowl," and deduce that there will be at least some impact on local food prices. But once we look beyond our national borders, we see drought, floods, tsunamis, earthquakes and natural disasters of historic proportions hitting major food suppliers around the world over the last three years, from Pakistan to China to Russia to Australia to Canada to Brazil to Mexico to Japan and beyond. It's not just U.S. food supplies that are in jeopardy, but world food supplies.
Droughts one year and floods the next devastated Australia's beef and wheat supplies. Fires ravaged Russia's "bread basket" grain fields for over a year. The worst drought in 300 years left 1 million acres of land in China unproductive, destroying that country's wheat crop as well - the largest in the world - and temporarily closing parts of the Yangtze River to shipping. While China does not export its wheat (The large population consumes it.), the loss of that crop means China has to IMPORT wheat, thus cutting into the world supply for everyone else and, as a result, hiking the price of wheat.
The United States is the world's largest supplier of maize (corn), but much of the corn crop has recently been redirected towards producing ethanol, a bio-fuel, rather than food. A shortage of corn may not seem important if one thinks only in terms of corn flakes, popcorn and corn on the cob, but corn syrup is a staple of almost everything we eat in this country. As the price of corn syrup goes, so does the price of everything that contains it, and the wholesale price of a bushel of corn doubled from the summer of 2010 to the summer of 2011.
Meat and dairy prices have also jumped, in the neighborhood of 10 percent over the last 12 months, largely due to reduced inventories and increased demand. (The old supply and demand market economics still applies here.)
How has this affected your monthly food bill? Between July of 2010 and July of 2011, according to the United States Department of Agriculture (USDA) Economic Research Service, your food prices have gone up, on average, according to the following:
Beef: Up 9.3 percent (Steak: 6.1 percent; Ground beef: 11.5 percent).
Pork: Up 7.3 percent.
Poultry: Up 2.7 percent (Chicken: 1.6 percent; other: 7.1 percent).
Beef prices are now projected to increase 7 to 8 percent and pork prices 6.5 to 7.5 percent total in 2011.
Due to higher input costs (the cost of direct material, direct labor, and other overhead items devoted to the production of a good or service), beef and pork prices are now significantly higher than in 2010.
Egg prices remain high and are now 13.3 percent above the July 2010 level.
Fish and seafood prices are 7.9 percent above the July 2010 level.
Rising feed prices, in conjunction with shocks to the global market due to recent Japanese supply disruptions, have led to fish and seafood prices that are considerably higher than 2010 levels.
Dairy prices are now 7.9 percent above the July 2010 level.
Within the dairy category:
*Milk prices are 10.2 percent above last Julyâ€™s prices;
*Cheese prices 8.1 percent above last Julyâ€™s level;
*Ice cream and related product prices are 8.3 percent above last July's level; and
*Butter prices are 21.0 percent above last July.
In 2010, dairy prices were up only 1.1 percent from 2009 (following a 6.4-percent decline from 2008 to 2009). Due to higher projected prices for farm milk in 2011, retail dairy prices are projected to increase 5 to 6 percent over 2010.
The fresh fruit index is up 7.9 percent overall from last year at this time, with apple prices up 2.1 percent, banana prices up 4.1 percent, citrus fruit prices up 2.0 percent, and other fresh fruit prices up 14.8 percent.
Since last year at this time, fresh vegetable prices are up 5.9 percent, with potato prices up 14.7 percent, lettuce prices up 2.4 percent, tomato prices up 5.4 percent, and other fresh vegetable prices up 4.1 percent from this time last year.
Processed fruit and vegetable prices are 3.3 percent above the July 2010 level. The contracts within the processed fruit and vegetable industry have kept the price of inflation well below that for fresh fruits and vegetables throughout 2011.
Cereal and bakery product prices were up 4.3 percent from last year at this time, with bread prices up 6.0 percent and breakfast cereal prices up 3.9 percent over the past year.
Lower yields for hard red varieties of wheat due to flooding in the Midwest have raised wheat prices to historically high levels. As a result, ERS has revised the 2011 forecast for cereals and bakery products to 4.0 to 5.0 percent over 2010 prices.
Sugar and sweets prices are 3.1 percent above last July.
Prices for nonalcoholic beverages, including coffee and carbonated beverages, are up 4.1 percent from last year.
The index for fats and oils is 10.4 percent above the July 2010 level. The significant price increase over 2010 is due in large part to surging soybean prices.
So, now what? Faced with global climate changes, mass flooding, droughts, fires, and massive political and financial insecurity, how does the average American family protect their food supply and their pocket book in these trying times?
More articles on the food crisis, rising food costs and how to eat healthy and save money in future Wednesday editions of the Newport Daily Express.